5/2/2023 - Economy and Finance

Ukraine, economic war and Bitcoin.

By Fernando Prats

Ukraine, economic war and Bitcoin.

The conflict in Ukraine and economic weapons

For more than a year since Russian troops invaded Ukraine, starting a war whose end we cannot wait in the short term. For now, both parties' claims to achieve a resolution seem incompatible and, given the relative stability that the conflict has achieved in military terms, there does not seem to be a gang willing to make too many concessions to the other.The conflict had profound implications in various fields and geographies: clear to the thousands of Ukrainians who were destroyed their cities and were forced to move; to the rest of Europe in terms of a greater perception of threat by Russia; to European energy security; to world food security and, in particular, to Africa. However, the interest here is in the use of “economic weapons” by the Western coalition against Russia.Sanctions, limitation of access to the Swift system, oil embargoes, are some of the economic weapons with which the United States and its allies tried to punish Russia for the invasion of Ukraine. With this, it was expected to affect his economy enough to force Putin to withdraw from the battlefield. In addition to the one-year review on the effectiveness of these measures, the particularity of the measures taken as a whole cannot be given. Although the use of financial flows - or weaponization of finance - it is not new in international politics, we are facing one unprecedented case due to the magnitude and range of the maneuver.In recent years, the international system has become more conflicting, and war in Ukraine is more a symptom than a cause of this trend. Behind this, we can observe the growing tension between the US and China that has manifested itself in several dimensions, highlighting technology among them. One of the main features that this tense relationship has had in recent years is the frequent use of economic and commercial or financial instruments to pursue geopolitical goals. Since measures Export control Until the use of weight as a trading partner to influence third countries, both powers used their enormous economic power for political purposes.Both in the growing power dispute between the two main powers and in the war in Ukraine, it is noted that the use of economic flows constitutes a key tool for dividing the conflicts of the 21st century. But, as well as the war conflicts represent great costs for the civilian population due to the destruction of conventional weapons, the same happens with economic weapons. The sanctions imposed on Russia do not affect only the Russian State and its “oligacas”. On the contrary, hundreds of thousands of Russians saw themselves severely affected for the sanctions on your day to day. In this way, one of the fronts in which the growing global geopolitical conflict affects the international economy.Another innovative element must be added to this scenario, which is a central element of this analysis: we are facing “the first crypto war”. In fact, cryptocurrencies have taken a place of great relevance in the war conflict. By the very nature of the technology, they were used on both sides. On the Ukrainian side, huge donations were made in cryptoactive for resistance and war-displaced. On the other hand, many Russian companies have used cryptocurrencies to avoid sanctions.From this, the question arises whether cryptocurrencies and, by their attributes and relative strength to others, especially Bitcoin- can fulfill the role of functioning as tools that allow users to draw the important costs imposed by the geopolitical game. In a scenario in which states increasingly use economic flows - among them financial ones - to pursue strategic objectives without prejudice to the potentially negative effects that this has on individuals, a technology which by nature escapes state control is profiled as an interesting alternative.However, even the same states can take advantage of it. In this sense, there is another paradigmatic case in which cryptocurrencies constitute a means to draw the complications imposed by geopolitical maneuvers. This is the Iran case, which suffers a trade embargo by the West, which severely affects its oil exports. However, the Persian country took advantage of its huge raw reserves to produce the energy needed for Bitcoin mining. Thus, the Iranian state “converts oil in crypto”.Can Bitcoin take this function on a massive scale? This question and other derivatives of the expansion of cryptographic technology awakens numerous debates in so diverse domains ranging from the high offices of the International Monetary Fund to Reddit forums. I would answer today would try to predict the future.To try to elucidate what the future faces in this sense, two variables must be closely followed: regulation and trust. On the one hand, the regulatory advancement of states and how each decides (or not) to regulate cryptocurrencies will affect their ability to function as a tool that allows users to draw the negative effects of the geopolitical game. On the other hand, the extent that the general public accepts and adopts these assets outside the circles most connected to technology and finances will be an important determinant of the success of this case of use for cryptocurrencies.We have already seen that societies can, through technology, dispute the state entities their traditional monopoly of monetary emission. It remains to be seen whether this company will succeed in the long run. Thinking this issue from geopolitical variables can contribute to reflection on the uses and reaches of this technology.

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fernando prats

Fernando Prats

Hi I'm Fernando, an advanced student of the Lic. in International Relations at UNR. In addition, I am Senior Research Analyst in London Politica.


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